Preferred Financial Services Inc. v. A&R Bail Bonds, LLC

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
PREFFERED FINANCIAL SERVICES )
INC., )
)
Plaintiff, )
)
v. ) C.A. No.: N19C-05-335 SKR
)
A&R BAIL BONDS, LLC, and RODNEY )
BURNS )
)
Defendants. )
MEMORANDUM ORDER
This 3rd day of June, 2020, upon consideration of Defendant’s Motion to
Dismiss pursuant to Superior Court Civil Rule 12(b)(6) (the “Motion”), 1 Plaintiff’s
Response, 2 the Superior Court’s decision and the Supreme Court’s affirmance in
Preferred Financial Services, Inc. v. A & R Bail Bonds LLC, et al.,3 (“Preferred I”),
and oral arguments on the Motion, it appears to the Court that:
1. The standard by which this Court reviews a motion to dismiss, pursuant to
Superior Court Civil Rule 12(b)(6), is well-established. The Court must accept as
true all well-pleaded allegations; 4 however, only claims that are “clearly without
merit” will be dismissed. 5 Further, a motion to dismiss shall be denied “unless the
1
Trans. ID 63617369.
2
Trans. ID 64373859.
3
2018 WL 587023 (Del. Super. Jan. 26, 2018), aff’d, 217 A.3d 60 (Del. 2019).
4
Janeve Co., Inc. v. City of Wilmington, 2009 WL 1482230 at *1 (Del. Super. May 7, 2009).
5
Id.
plaintiff would not be entitled to recover under any reasonably conceivable set of
circumstances susceptible of proof.”6
2. Defendant contends that the doctrines of res judicata and collateral
estoppel preclude Plaintiff from bringing this action because issues that would
dispose of this case, have previously been adjudicated in Preferred I.
Res Judicata
3. Res judicata will preclude a plaintiff’s claim where the following elements
are met:
(1) the original court had jurisdiction over the subject
matter and the parties; (2) the parties to the original action
were the same as those parties, or in privity, in the case at
bar; (3) the original cause of action or the issues decided
was the same as the case at bar; (4) the issues in the prior
action must have been decided adversely to the appellants
in the case at bar; (5) the decree in the prior action was a
final decree. 7
4. The parties dispute whether element (3) above is met; whether the Plaintiff
actually brought, or should have brought, the claims that are now in front of the
Court in the previous action. 8 Under Delaware law, to assert res judicata as a bar to
a plaintiff's claim, in addition to showing that the same transaction formed the basis
for both the present and former suits, the defendant must show that the plaintiff
6
Id.
7
LaPoint v. AmerisourceBergen Corp., 2009 WL 623288, at *4 (Del. Mar.12, 2009)
8
Kossol v. Ashton Condominium Ass'n, Inc., 637 A.2d 827 (Del. 1994).
2
“neglected or failed to assert claims which in fairness should have been asserted in
the first action.” 9
5. The Court finds that Preferred I and this action arise out of the same
transaction, but that Plaintiff did not neglect or fail to assert the claims that are now
before the Court. The previous action was strictly a confession of judgment action,
meaning that Plaintiff could not append additional claims in that action. Therefore,
Plaintiff’s claims are not barred by res judicata, because he did not have an
opportunity to litigate these claims in the earlier action.
Collateral estoppel
6. Collateral estoppel applies where:
(1) the issue previously decided is identical with the one
presented in the action in question, (2) the prior action has
been finally adjudicated on the merits, (3) the party against
whom the doctrine is invoked was a party or in privity with
a party to the prior adjudication, and (4) the party against
whom the doctrine is raised had a full and fair opportunity
to litigate the issue in the prior action. 10
7. Defendant’s Motion asserts that Preferred I decided the issue of whether
Plaintiff and Defendant entered into their Business Loan Agreement in pari delicto 11
to illegally circumvent a Delaware statute. The Court resolved that issue in the
9
LaPoint v. AmerisourceBergen Corp., 970 A.2d 185 (Del. 2009).
10
Betts v. Townsends, Inc., 765 A.2d 531, 535 (Del.2000).
11
Latin phrase meaning “in equal fault.”
3
affirmative and, hence, found the Agreement to be void. According to Defendant,
that decision was case- dispositive and precludes Plaintiff from bringing this action.
8. In Preferred I, Defendant challenged Plaintiff’s confession of judgment
and argued that it could not be enforced, because the Business Loan Agreement that
contained the confession of judgment clause violated Delaware law. After an
extensive evidentiary hearing where both Plaintiff and Defendant testified, a
Delaware Superior Court Commissioner found that the contract was unenforceable
because it violated Delaware law. The Commissioner ruled that she would leave the
parties where she found them, because the parties were equally culpable in
conspiring to violate the law. That decision was approved and adopted by this Court
(the “Decision”).
9. The issue raised and addressed in the Decision is identical to an issue now
before the Court. In order for the Plaintiff to obtain relief under its current claims,
i.e. quantum meruit, unjust enrichment, promissory estoppel, it has the burden to
show that it was not equally in the wrong with Defendant in making the illegal
agreement. 12 There are no new factual circumstances in this case that were not
before the Court in Preferred I. Therefore, the first element of collateral estoppel is
12
Della Corp. v. Diamond, 210 A.2d 847, 469 (Del. 1965) (“[I]t is against the public policy of this State to permit its
courts to enforce an illegal contract prohibited by law. Ordinarily, we think, when such is the fact, neither party has a
remedy to any extent against the other”).
4
met because the issue before the Court in Preferred I was identical to the issue before
the Court in this action.
10. The remaining elements of collateral estoppel are also satisfied. The
Court’s decision in Preferred I was a final judgment on the merits and has been
affirmed by the Supreme Court. In addition, Plaintiff was a party to the previous
action and had a full and fair chance to litigate the legality of its conduct in making
the Business Loan Agreement with Defendant. Because that issue is dispositive of
the claims asserted in the current action, Plaintiff’s current action is barred under the
doctrine of collateral estoppel.
11. For the foregoing reasons, Defendant’s Motion to Dismiss is hereby
GRANTED.
IT IS SO ORDERED.
_____________________
Sheldon K. Rennie, Judge
Cc: Brian Jordan, Esq., Wilmington, DE
Sean O’Kelly, Esq., Wilmington, DE
5